December 5, 2009
Cash out retirement funds for real estate deal?
Ran D asked:
This is more of a question for seeking advice than anything…
This is more of a question for seeking advice than anything…
I found a property that could potentially turn a quick $15k-$20k profit. The downside is that I would need to pull around $20k out of my retirement plan to purchase it.
It’s a pretty steep potential profit….
Thoughts?
Natalya
Comments on Cash out retirement funds for real estate deal?
Kylie
First, does your retirement plan even allow that? Read the plan provisions.
Second, you’ll lose 30-40% of whatever you pull out to penalty and taxes. So if you need $20K for the deal, you’ll have to pull out close to $35K. Then there’s the risk that the deal doesn’t turn out like you think it will. You do the math.
Chasity
TAKE a loan, not a withdrawal. Set up a repayment plan and repay the money. Otherwise you will have serious tax problems, losing 20-45% of the contributions. And if you really are making the quick profit, you will be able to pay off the loan in full.
Don’t forget the costs of buying and selling a house. They eat into the profits. And there are carrying costs while waiting to sell house. AND this is a buyer’s market. MUCH easier to find a house to buy and MUCH harder to find a buyer for a house you’re selling.
Branden
if you have a 401k you can borrow on 3 different loans up to total $50000. You will be paying yourself back with interest. This is a much better option than making a withdrawal